Published On: Fri, Dec 5th, 2014

Bill Gross Tells Investors to ‘Take the Chips off the Table, ‘ But Is this a Way to Win?

Pimco founder Bill Gross

Bill Gross, formerly of Pimco and who is now managing Janus Capital’s Unconstrained Bond fund, paints a gloomy picture of the markets and suggests “taking chips off the table, ” as reported by CNBC. He blasted Central banks around the world for monetary easing, and says now is not the time for investors to take risks. The financial strategies taken by the central banks to prop up their economies brings them to the “point of low return” when it comes to liquidity.

He said, “Investors may want to begin to take some chips off the table. Raise asset quality, reduce duration, and prepare for at least a halt of asset appreciation engineered upon a false central bank premise of artificial yields, Quantitative Easing, and the trickling down of faux wealth to the working class.”

In the third letter since moving from Pimco to Janus, Gross sounded incredulous “How could they?  How could policymakers have allowed so much debt to be created in the first place and then failed to regulate their own their own system accordingly? How could they have that money printing and debt creation could create wealth instead of just more and more debt?”

Jeff Miller, of investing.com, says we’ve heard this elegy for the markets from Bill Gross before, and it didn’t play out as tragically as he thought it would. Miller notes that Gross’ analysis has been “consistently wrong” in his plea to investors to take stock. While Gross may know a thing or two about bonds, as founder and manager of the biggest bond fund in the world at Pimco, Miller doesn’t think he gives a good read on the trajectory of risk assets.

In 2010, Gross warned to cut back on risk assets and gave a similar prescription of gloom about the S&P 500 falling. However, that didn’t happen; since then the averages have reached record highs. Gross was also critical of Quantitative Easing, which may have had its problems, but it certainly has not hurt stocks.

So does anyone who followed Gross’ advice in 2010 have chips on the table? If they followed his advice then, they would not. But given the rise in the stock market, it doesn’t seem many people were listening to Gross then, and Miller thinks stock investors shouldn’t take his statements too seriously now.

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